Kansas regulators closed The Farmers and Merchants State Bank of Argonia on Friday. This is the seventh bank to fail in 2017. The last bank to fail before Friday was on May 26 when a small Illinois bank failed. Bank failures have become much less frequent in recent years. Only five banks failed in 2016, and only eight banks failed in 2015.
The Farmers and Merchants State Bank of Argonia had two branches and $34.2 million in assets and $29.6 million in deposits. The FDIC arranged for another bank to assume all deposits. All deposits, even those above the FDIC limits, were transferred to the new bank as described in the FDIC’s FAQs:
No one lost any money on deposit as a result of the closure of this bank. All deposits, regardless of dollar amount, were transferred to Conway Bank.
As is typical, the only concern for depositors of the failed bank are those with CDs that had high rates. Those high rates may not last as the FDIC describes in its FAQs:
Interest on deposits accrued through close of business on Friday, October 13, 2017, will be paid at your same rate. The Farmers and Merchants State Bank of Argonia’s rates will be reviewed by Conway Bank and may be lowered; however, you will be notified in writing of any changes. You may withdraw funds from any transferred account, regardless of whether your interest rate changes, without early withdrawal penalty until you enter into a new deposit agreement with Conway Bank.
Credit Union Liquidations and Conservatorships
We also had a recent credit union failure. Shreveport Federal Credit Union in Louisiana was closed by the NCUA on October 2. Similar to the above bank failure, the NCUA arranged for another credit union (Red River Employees Federal Credit Union of Texarkana, Texas) to assume the failed credit union’s membership and most shares, loans, and other assets.
This is the third credit union failure in 2017. The last failure occurred in March.
In addition to liquidations, the NCUA has placed six credit unions into conservatorships this year. In these cases, the credit unions remain open, but the NCUA manages the credit unions to resolve the financial health issues while maintaining normal member services. One of the possible outcomes of a conservatorship is liquidation, so it’s very important that members with deposits over the NCUA coverage limits reduce their deposits below the coverage limits. Other possible outcomes include a restoration of the credit union’s health and a merger into a more healthy credit union.
The most recent credit union placed into conservatorship by the NCUA was LOMTO Federal Credit Union in Woodside, New York. This occurred on June 26. LOMTO has large exposure to the New York taxi industry which is under pressure from Uber and other app-based ridesharing services. The most high profile credit union that has been struggling due to high exposure to the taxi industry is Melrose Credit union which was placed into conservatorship in February where it remains as of today. The full list of credit union liquidations and conservatorships is provided in this NCUA page.
Below is the summary of the failed bank and credit union:
7th Bank Failure of 2017 (1st in Kansas) (Oct 13)
- Closed Bank: The Farmers and Merchants State Bank of Argonia, Argonia, KS
- FDIC Press Release
- Size: 2 branches, $34.2 million in assets and $29.6 million in deposits
- Acquiring Bank: Conway Bank, Conway Springs, KS
- Possible Uninsured Deposits: all deposit accounts, including brokered deposits, have been assumed by Conway Bank (FDIC Q&A)
- Rate Changes: The Farmers and Merchants State Bank of Argonia’s rates will be reviewed by Conway Bank and may be lowered (FDIC Q&A)
- Estimated Cost to Deposit Insurance Fund: $2.6 million
- Financial Ratings: 3 stars at Bankrate.com, 0 star at BauerFinancial, F & Texas Ratio of 194% at DepositAccounts.com (see financial rating note)
3rd Credit Union Liquidation of 2017 (Oct 2)
- Liquidated CU: Shreveport Federal Credit Union, Shreveport, LA
- NCUA Press Release
- Size: assets of $86 million and served 22,212 members
- Acquiring CU: Red River Employees Federal Credit Union, Texarkana, TX
Financial Ratings Notes: 0 star is lowest at BauerFinancial, 1 star is lowest at Bankrate.com and an F is lowest at DepositAccounts.com, Texas Ratios over 100% is considered at risk. Ratings at DepositAccounts.com and BauerFinancia are based on June 30, 2017 data. Ratings at Bankrate.com are based on March 31, 2016 data.
- FDIC list of failed banks
- NCUA list of failed and conserved credit unions
- Evaluate the Financial Health of Your Bank or Credit Union
- Latest FDIC info on deposit insurance
- My bank failure review posts
- Review of the 2016 bank and credit union failures
- Review of the 2015 bank and credit union failures
- Review of the 2014 bank and credit union failures
- Review of the 2013 bank and credit union failures
- Review of the 2012 bank and credit union failures
- Review of the 2011 bank and credit union failures
- Review of the 2010 bank and credit union failures
- 10 Lessons from the 2008 bank failures